A Crackdown Is Coming

Federal investigators are looking all over Wall Street for evidence of market rigging

- By Tom Schoenberg, Matt Robinson, and Sridhar Natarajan

Bill Hwang’s lawyers couldn’t believe it. The fallen billionaire investor was sitting in federal custody in New York, less than 48 hours after his legal team had visited prosecutors to talk them out of criminal charges. The effort seemed to be going well until the feds scooped up Hwang at daybreak on April 27 to face 11 felony charges—and potentially the rest of his life in prison. “In no event was an arrest necessary,” his attorneys said in a statement expressing frustration that morning, noting that Hwang had been voluntarily answering the government’s questions for months.

All of Wall Street should pay close attention. The Hwang case marks an upswing of federal investigations into a slew of suspected trading abuses. Three other broad inquiries have emerged in recent months to examine so-called block trades, short sales, and well-timed wagers. The probes go into corners of the market that historically haven’t faced much scrutiny, and they all center on the same question: Are markets rigged?

Biden administration officials have spent the past year laying groundwork to pursue white- collar crime more aggressively, rolling out policy changes—some disclosed, some not—that will make probes easier to start, faster to finish, and more punishing. “There’s a perception that there are two sets of rules,” says Gurbir Grewal, head of the U.S. Securities and Exchange Commission’s enforcement division. “We want everyday Americans to have confidence when they invest in the market.”